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Taji Taka
Caldari
Investment Relations Limited
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Posted - 2007.05.14 04:57:00 -
[1]
Edited by: Taji Taka on 14/05/2007 04:56:55
Greetings,
I've been a regular browser of this forum and I've enjoyed the amount of market/business discussion going on. With that in mind, I'd like to make public the practice of my in-game business and request feedback. I've seen many great suggestions and conversations that have helped me shape this model. I consider it to be fairly simple and effective in its purpose and I'm sure there are others like it out there in the private investment world. Please take a look and tell me what you think.
Terms:
Cycle: a 2-week period; during the transition between cycles investors may choose to deposit or withdraw from their TIAs and change their payout percentage
Payout/Payout %: payouts are actual ISK paid to investors based on a % they choose of TRP each cycle (between 10-100% in 10% increments)
Total Fund: The combined total amount of ISK of every investor; accrual %'s are based off this number at the beginning of each cycle
TIA: Total Investment Account; this represents an investor's total investment including profits
TRP: Total Realized Profit; this is the amount of profit made off of IRLL's ventures using invested ISK during each cycle
Accrual %: the percentage amount of TRP each investor makes per cycle; this percentage of ISK is added to each investor's TIA each cycle; this number is determined by investors' individual contributions compared to other investors:
Maintenance Fee: this fee represents a total of 10% taken from TRP that goes directly to the corp for fuel costs, fees, and profit. A maintenance fee occurs at 5% for each product sale and each payout/withdrawal.
Example:
Investor A > TIA = 500 mil
Investor B > TIA = 250 mil
Investor C > TIA = 100 mil
Total Fund = 850 mil
Investor A Accrual % = 58.82%
Investor B Accrual % = 29.41%
Investor C Accrual % = 11.64%
So let's say in one cycle the corp earns 300 mil of profit (TRP).
Investor A TIA - 500 mil + 176.46 mil = 676.46 mil (~35% return)
Investor B TIA - 250 mil + 88.23 mil = 338.23 mil (~35% return)
Investor C TIA - 100 mil + 34.92 mil = 134.92 mil (~34.92 return)
I piloted this system for about a month with private investors and they were very pleased with the results. I've grown it from a 650 million investment to about 10 billion in a couple months. This is due to high interest in the program and good profits. As you can see, returns are close to the same across the board, but definitely based on corp performance (which can fluctuate, but definitely be better than static return %'s). Any thoughts or feedback on the system would be appreciated.
-Taji Taka
CEO
Investments Relations Limited [IRLL]
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Ionia
Advanced Manufacturing
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Posted - 2007.05.14 06:20:00 -
[2]
This 'system' is nothing special. When you issue a dividend it is automatically split between the shareholders in this way.
What is the actual business?
The returns you are talking about seem huge, again, whats the business?
If you have turned 650m into 10b, what is the reason you need more isk?
Thanks,
Ionia
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Amicus Pauperi
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Posted - 2007.05.14 07:45:00 -
[3]
If I'm reading this correctly - please correct me if I'm not - this sounds like a real life mutual fund. You invest in the fund, and you get a %dividend of the total profit equal to your %ownership in the total mutual fund. Your dividend is automatically reinvested, minus your payout percentage.
It basically allows the investor to:
1. Continually reinvest the biweekly earnings, which is good for the company (increased capital to work with) OR
2. Use the investment as a source of income (like little ole grannies using the dividends from Coca Cola stocks as income)
This gives the investor flexibility in deciding how to use the money. It could be a negative, however, if all your investors decide on a 100% payout. The company will never grow.
One thing I wonder is - if I'm an investor, will I be able to fully liquidate my account? Ie, "I want all my ISK back!" If you don't allow that, then why would anyone ever choose a payout% less than 100%?
-AP
Economic PvP - Cornering Jita 4-4 |
Rome CEO
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Posted - 2007.05.14 15:12:00 -
[4]
You've stated nothing about your business plan.
How do you intend to achieve these rates? Don't get me wrong, I love neat tidy organized formats for returns and the different metrics that will be reported on...but...
How do you intend to actually execute your Fund?
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BSAC Manager
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Posted - 2007.05.14 16:02:00 -
[5]
It is an interesting idea that is not be scalable with in-game mechanics.
1) How do you keep track of investors?
2) How many investors can you handled with this method?
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Ricdic
Caldari
Corporate Research And Production Pty Ltd
Zzz
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Posted - 2007.05.14 16:17:00 -
[6]
Edited by: Ricdic on 14/05/2007 16:16:08
Ponzi/Pyramid?
edit: To clarify, I feel just about anything that forces reinvestment screams Ponzi
Sick of the waits with empire research slots? Use mine! |
Taji Taka
Caldari
Investment Relations Limited
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Posted - 2007.05.14 23:00:00 -
[7]
 Originally by: Ionia
This 'system' is nothing special. When you issue a dividend it is automatically split between the shareholders in this way.
What is the actual business?
The returns you are talking about seem huge, again, whats the business?
If you have turned 650m into 10b, what is the reason you need more isk?
Thanks,
Ionia
I suppose you could see it that way, but I don't issue "shares" persay. The system is meant to be competitive between investors since I publically announce everyone's investment amount and accrual %'s at the beginning of each cycle which allows them to put more in to gain more accrual % over others or withdraw if they need more cash on hand.
The business itself is based on using capital for many things, though fairly basic:
1) Purchasing high-volume BPO's, researching, and selling copies and/or units for profit
2) Purchasing bulk T1/T2 ships/mods and reselling into perimeter markets
3) Movement of bulk material for profit per jump
I don't recall me asking for more ISK...this is not a public investment nor am I planning on it becoming one at this point.
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Taji Taka
Caldari
Investment Relations Limited
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Posted - 2007.05.14 23:11:00 -
[8]
Originally by: Amicus Pauperi
If I'm reading this correctly - please correct me if I'm not - this sounds like a real life mutual fund. You invest in the fund, and you get a %dividend of the total profit equal to your %ownership in the total mutual fund. Your dividend is automatically reinvested, minus your payout percentage.
It basically allows the investor to:
1. Continually reinvest the biweekly earnings, which is good for the company (increased capital to work with) OR
2. Use the investment as a source of income (like little ole grannies using the dividends from Coca Cola stocks as income)
This gives the investor flexibility in deciding how to use the money. It could be a negative, however, if all your investors decide on a 100% payout. The company will never grow.
One thing I wonder is - if I'm an investor, will I be able to fully liquidate my account? Ie, "I want all my ISK back!" If you don't allow that, then why would anyone ever choose a payout% less than 100%?
-AP
AP,
You are right on...Let me answer your questions/comments:
1) It could be a negative, however, if all your investors decide on a 100% payout. The company will never grow.
Don't forget that the corp pulls 5% of EVERY transaction's profit and EVERY withdrawal amount. So basically, the instant someone invests ISK they lose 5% to the corp, but generally earn back way more than that in one cycle. Investors would only lose money if they deposited and then withdrew before one cycle was over. It's meant as a long-term venture.
2) One thing I wonder is - if I'm an investor, will I be able to fully liquidate my account? Ie, "I want all my ISK back!" If you don't allow that, then why would anyone ever choose a payout% less than 100%?
Investors are allowed to withdraw up to their full TIA with the following stipulations:
a:If withdrawn during a cycle change it is subject to a 5% maintenance fee
b:If withdrawn during mid-cycle it is subject to a 30% maintenance fee (to promote keeping the money in during cycles and also give me time to sell things if a large withdrawal is coming up)
-Taji
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Taji Taka
Caldari
Investment Relations Limited
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Posted - 2007.05.14 23:15:00 -
[9]
Originally by: Rome CEO
You've stated nothing about your business plan.
How do you intend to achieve these rates? Don't get me wrong, I love neat tidy organized formats for returns and the different metrics that will be reported on...but...
How do you intend to actually execute your Fund?
I've been achieving it since February actually. There was no formal business plan in place...I suppose it's more of a small investment model than a full-blown business plan. Since it's private it wasn't completely necessary.
Ideally, the fund will continue to grow as it has with more profits and investments to allow the corp to own a full slew of BPO's and go into moer ship and module production. The corp initially started as strictly a reselling corp, but since it's been able to purchase its own BPOs and do research this will allow more options.
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Taji Taka
Caldari
Investment Relations Limited
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Posted - 2007.05.14 23:20:00 -
[10]
Originally by: BSAC Manager
It is an interesting idea that is not be scalable with in-game mechanics.
1) How do you keep track of investors?
2) How many investors can you handled with this method?
1) I use Excel to track transactions, profits, and investor's investments and accruals among other things.
2) I started with 2 investors and have ramped up to 18 at this point.
-Taji
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Taji Taka
Caldari
Investment Relations Limited
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Posted - 2007.05.14 23:22:00 -
[11]
Originally by: Ricdic
Edited by: Ricdic on 14/05/2007 16:16:08
Ponzi/Pyramid?
edit: To clarify, I feel just about anything that forces reinvestment screams Ponzi
Reinvestment is an option, but not forced. You can choose 100% payout and get your profits paid back out bi-weekly.
-Taji
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Amicus Pauperi
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Posted - 2007.05.15 00:39:00 -
[12]
Originally by: Taji Taka
AP,
You are right on...Let me answer your questions/comments:
1) It could be a negative, however, if all your investors decide on a 100% payout. The company will never grow.
Don't forget that the corp pulls 5% of EVERY transaction's profit and EVERY withdrawal amount. So basically, the instant someone invests ISK they lose 5% to the corp, but generally earn back way more than that in one cycle. Investors would only lose money if they deposited and then withdrew before one cycle was over. It's meant as a long-term venture.
2) One thing I wonder is - if I'm an investor, will I be able to fully liquidate my account? Ie, "I want all my ISK back!" If you don't allow that, then why would anyone ever choose a payout% less than 100%?
Investors are allowed to withdraw up to their full TIA with the following stipulations:
a:If withdrawn during a cycle change it is subject to a 5% maintenance fee
b:If withdrawn during mid-cycle it is subject to a 30% maintenance fee (to promote keeping the money in during cycles and also give me time to sell things if a large withdrawal is coming up)
-Taji
Right on. Now that I understand it better, this seems like a solid investment method with its own unique set of pros and cons. I know some posters have asked about your business plan, but since your stated intent was a critique of the investment vehicle itself, I will refrain from asking how you obtained 1400% growth in a few months time 
Pros:
1) Potential for rapid corporate growth unhindered by dividend payouts. Maxed out at 85.5% of biweekly earnings if all investors choose a payout% of 10%
2) High flexibility to treat the investment as an income stock or growth stock.
3) Easy to obtain more capital by bringing more investors.
4) Promotes long-term investment to recoup the initial 5% maintenance fee loss.
5) Private control allows close control of the number of investors.
Cons:
1) Potential for sluggish corporate growth. Maxed out at 5% of biweekly earnings if all investors choose a payout% of 100%.
2) Corporate assests must remain fairly liquid incase of a "run" on the investment. Ie, if everyone decides to cash out their TIAs at the next biweekly payout, then you'll have to liquidate everything within 2 weeks.
3) Possibility for large investor turnover.
4) No investor protection against losses. Losses would have to mean a decrease in each investor's TIA.
5) A large number of investors would cause a bookkeeping nightmare, moreso than a bond or IPO.
And to state the obvious, of course your investors are happy. You've grown their money by leaps and bounds. However, that growth says little about the investment vehicle a lot about your abilities as a trader. Overall, I think this vehicle is very investor friendly at the cost of corporate flexibility. It would be very difficult to move into Mothership production and still guarantee liquidity. Great idea though, maybe someone will create a public IPO using this method. Nicely done.
Economic PvP - Cornering Jita 4-4 |
Shadarle
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Posted - 2007.05.15 01:52:00 -
[13]
It's going to be very hard to maintain the same percentage profits. I did the same thing with going from 300 mil to 10 billion in a few months. But there is no way to get that same percentage gain in a few more months or you'd have a trillion isk in no time.
Tanking Setups Compared
Stacking Penalty / Resists Explained |
Amicus Pauperi
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Posted - 2007.05.15 02:03:00 -
[14]
I wonder how much of that growth was due to profits, and how much due to new investor capital. And how many months did it take you to hit 10bil, Shadarle? I'm about to cross the 1bil mark, after trading for about a month with less than 10mil starting. Just trying to see how I measure up
Economic PvP - Cornering Jita 4-4 |
Taji Taka
Caldari
Investment Relations Limited
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Posted - 2007.05.17 01:52:00 -
[15]
Originally by: Amicus Pauperi
Originally by: Taji Taka
AP,
You are right on...Let me answer your questions/comments:
1) It could be a negative, however, if all your investors decide on a 100% payout. The company will never grow.
Don't forget that the corp pulls 5% of EVERY transaction's profit and EVERY withdrawal amount. So basically, the instant someone invests ISK they lose 5% to the corp, but generally earn back way more than that in one cycle. Investors would only lose money if they deposited and then withdrew before one cycle was over. It's meant as a long-term venture.
2) One thing I wonder is - if I'm an investor, will I be able to fully liquidate my account? Ie, "I want all my ISK back!" If you don't allow that, then why would anyone ever choose a payout% less than 100%?
Investors are allowed to withdraw up to their full TIA with the following stipulations:
a:If withdrawn during a cycle change it is subject to a 5% maintenance fee
b:If withdrawn during mid-cycle it is subject to a 30% maintenance fee (to promote keeping the money in during cycles and also give me time to sell things if a large withdrawal is coming up)
-Taji
Right on. Now that I understand it better, this seems like a solid investment method with its own unique set of pros and cons. I know some posters have asked about your business plan, but since your stated intent was a critique of the investment vehicle itself, I will refrain from asking how you obtained 1400% growth in a few months time
Pros:
1) Potential for rapid corporate growth unhindered by dividend payouts. Maxed out at 85.5% of biweekly earnings if all investors choose a payout% of 10%
2) High flexibility to treat the investment as an income stock or growth stock.
3) Easy to obtain more capital by bringing more investors.
4) Promotes long-term investment to recoup the initial 5% maintenance fee loss.
5) Private control allows close control of the number of investors.
Cons:
1) Potential for sluggish corporate growth. Maxed out at 5% of biweekly earnings if all investors choose a payout% of 100%.
2) Corporate assests must remain fairly liquid incase of a "run" on the investment. Ie, if everyone decides to cash out their TIAs at the next biweekly payout, then you'll have to liquidate everything within 2 weeks.
3) Possibility for large investor turnover.
4) No investor protection against losses. Losses would have to mean a decrease in each investor's TIA.
5) A large number of investors would cause a bookkeeping nightmare, moreso than a bond or IPO.
And to state the obvious, of course your investors are happy. You've grown their money by leaps and bounds. However, that growth says little about the investment vehicle a lot about your abilities as a trader. Overall, I think this vehicle is very investor friendly at the cost of corporate flexibility. It would be very difficult to move into Mothership production and still guarantee liquidity. Great idea though, maybe someone will create a public IPO using this method. Nicely done.
Thanks :)
Just a few comments...corp profit is set at 10% due to taking 5% of profits and 5% when investors payout/withdraw money. Growth potential can vary though I agree...I operate the corp on a positive/negative gap by adding all assets, cash on hand, and open orders together minus what I would owe all investors if they withdrew at once. Sometimes it will be negative, but the beauty of long-term investing lets me earn it back and go positive...the goal is to of course go way into the positive once BPO research completes and I can make more margin on production/copying than buying/reselling.
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Taji Taka
Caldari
Investment Relations Limited
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Posted - 2007.05.17 01:54:00 -
[16]
Originally by: Shadarle
It's going to be very hard to maintain the same percentage profits. I did the same thing with going from 300 mil to 10 billion in a few months. But there is no way to get that same percentage gain in a few more months or you'd have a trillion isk in no time.
I agree...and percentage growth has definitely declined as the total fund grows. But another thing to understand is it's a one-person operation...and I work a lot, so I'd say for the time I can spend on it it still works pretty well.
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